Posted: February 7th, 2016

Discuss the Arbitrage Pricing Theory and the Fama-French factor and the “preciseness” of techniques used to calculate cost of capital. How does one decide on which technique is best to use?

I need 100 word original notes in answering the following questions:

1. What is operating leverage and how does it influence a project?

2. What are the two methods for estimating debit cost of capital, and what do you do when there is default risk? Explain the circumstances in which you would use each method.

3. In what instances would an investor want to “beat the market” and “hold the market”? Discuss the strategies for each and their dependence on an investor’s information and trading skills.

4. In what ways do uninformed investors trade too much? Discuss how uninformed investors use the CAPM and how their behaviors deviate.

I need original notes that exceed 250 words per question for the following questions:

1. What additional assumptions (to the main three) are important when applying the Capital Asset Pricing Model and what are the underlying strengths and weaknesses of this application? Discuss the reliability of the model and give examples in your explanation.

2. Discuss the Arbitrage Pricing Theory and the Fama-French factor and the “preciseness” of techniques used to calculate cost of capital. How does one decide on which technique is best to use?